Money and Markets: Essays in Honor of Leland B. Yeager

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The legacy of Bismarck 249Old age is something of a mystery. We do not know why all animals includinghuman beings decay in the latter part of their lives, although medical researchersare working on the problem. It’s not impossible that old age and the decay thatcomes with it will turn out to be curable. An increase in lifespan so the averageperson died at 150 or even 300 would bankrupt the current system. Further, itwould not be possible to increase the tax on people under 65 enough to pay thepension. But all of this is a problem for the future. We are already encountering asituation where it is suggested by many that the retirement age be moved andpeople who are approaching the pensionable age are protesting such changes. Theproblem should be thought of, but at the moment does not seem to be urgent.Let us now turn to a second major part of Bismarck’s reforms, governmentprovided health insurance. It should be pointed out that at the time he made thischange, our knowledge of disease was much worse than it is now and indeed not alldoctors even believed that germs caused disease. Virie, of course, were totallyunknown. Most of the germ diseases were incurable, although in a few cases,malaria for example, a suitable medicine to keep it in check was known. It’s not atall obvious that providing free medical care which included putting people in ahospital was to their benefit in 1880. Hospitals were still to some extent a diseasetrap. But the prospect of being infected in the hospital in general disappearedshortly after the program began because hospital personnel became very, veryconcerned with sanitation and hence most germs succumbed to soap and water.Continuing the history of medicine up to the revolutions of the 1930s, mostdiseases were resistant to medical treatment. The invention of sulfanilamide, whichI remember myself, thus offering evidence that it’s not incredibly ancient, was thefirst step in the development of what we used to call miracle drugs. Today doctorshave available to them a set of medicines immensely better than could have beenprovided by Bismarck’s original hospitals. Thus providing medical treatment todayis much more helpful that it was when the program was first started in Germany.But although the great advance in medicine and the prospects of further greatadvances are good news for the average citizen who doesn’t think much abouttaxes, and in fact as a result of Prince Bismarck’s concealing a good part of theSocial Security tax by claiming that it is paid by the employer, mistakenly underestimateshis tax bill. Looking at the matter from the standpoint of the government,however, these medical advances increase the implicit debts of the pension system.Most governments now are seriously worried about their future budget deficit,although most politicians tend to not worry much about things which will be aburden on their successors.Nevertheless the problem is getting consideration. Greenspan, who among hisother duties finances the federal debt, gave a speech saying that it was necessary tomove the year of eligibility for the pension back. He is a prominent public figure,but this is the first time that I can remember that a speech by him received not onlyfront-page notice, but the most prominent place on the front page of the WashingtonTimes and a picture. He is not the only person who is worried. There have beenoccasional other suggestions that eligibility for the pension be moved back from65 to 70 or even some higher number. In every case this has aroused a storm of
250 Gordon Tullockindignation. Further, if medicine continues to improve in future years, even moredrastic measures may be necessary.When the pension system was first established it was pointed out that it involveda large gift from the younger part of the population to those who were over theretirement age. Putting the retirement age back to 70 or even later will not onlyhurt people in the years 65–70 but also almost all the younger people who willcontinue paying the tax while their pension is deferred. Politically this is dangerousto the politicians who enact it, as well as being painful for those whose pension isdeferred with a result that they will collect it for fewer years and hence its actualmonetary value goes down. So far in the United States no active politician hasdared suggest this program.These welfare programs were inaugurated by Prince Bismarck in Germany andmuch of the world followed in Bismarck’s footsteps. The present government ofGermany is socialist, but they confront a situation in which they cannot runsignificant budget deficits because of the monetary arrangements for the EuropeanCommon market. As a result the prime minister in a speech in East Germany saidthat it would be necessary to cut back on various social programs. This led tosomething very close to a riot and he was shouted down. In spite of the fact that thecurrent government in Germany has only the narrowest of majorities, it wouldappear that the prime minister is going ahead with his plan. If a German socialistregards the present situation is dangerous enough so that a number of the socialistvoters must have their pensions cut, it must be serious indeed.I do not know what will happen next in Germany, or in other countries whichface a similar critical problem. It seems possible that after Bismarck led the worldinto the present difficulties, one of his successors may lead the world back. This isthe most speculative of speculations, but it is not impossible. Traditionally governmentsfacing financial problems have turned to inflation as a way out. The presentfinancial arrangements in the European common market apparently make thatimpossible, but monetary arrangements which looked very stable in the past havein fact been succeeded by rapid inflation. It’s not obvious which is worse, inflationor overt repudiation of the promises which have been implicitly given to almosteveryone enrolled in the Bismarckian scheme.ReferencesDawson, William (1973). Bismarck and State Socialism: An Exposition of the Social and EconomicLegislation of Germany since 1870. New York: Howard Fertig, pp. 109–28. Reprint of the1890 edn by Swan Sopnnenschein, London.Liebergott, Stanley (1976). American Economy: Income, Wealth, and Want. Princeton, NJ:Princeton University Press.Tullock, Gordon (1997). Economics of Income Redistribution. Boston, MA: Kluwer Academic.
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Money and MarketsIn recent decades,
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The Cultural Foundations ofEconomic
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First published 2006by Routledge2 P
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viiiContents9 The genesis of an ide
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ContributorsJürgen G. Backhaus is
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Preface and acknowledgmentsLeland B
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1 A zeal for truthRoger KopplIf the
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A zeal for truth 3kind of decision-
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A zeal for truth 5and attributes to
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A zeal for truth 7“30 years to th
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A zeal for truth 9I have a $10 bank
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A zeal for truth 11conversation, Ye
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A zeal for truth 13a market economy
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A zeal for truth 15of “approval o
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A zeal for truth 17to offer about e
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A zeal for truth 19Klappholz, K. an
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2 The Yeager mystiqueA profile of t
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The Yeager mystique 23students bent
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The Yeager mystique 25Yeager’s pe
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The Yeager mystique 27none, but not
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The Yeager mystique 29demeanor coul
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The Yeager mystique 31wanted to cou
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The Yeager mystique 33The common id
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The Virginia renaissance in politic
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4 LelandA personal appreciationGord
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Leland, a personal appreciation 47I
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Monopoly politics and its unsurpris
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Good ideas and bad regressions 67I
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Good ideas and bad regressions 69am
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Good ideas and bad regressions 71
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Good ideas and bad regressions 73ap
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Good ideas and bad regressions 75Le
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Good ideas and bad regressions 772.
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Good ideas and bad regressions 79pa
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Good ideas and bad regressions 81th
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7 Pluralism, formalism, andAmerican
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Pluralism, formalism, and American
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8 Leland’s favorite economists *J
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Figure 8.1 The “Genealogical Tabl
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Leland’s favorite economists 103o
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Leland’s favorite economists 105e
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Leland’s favorite economists 107O
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Leland’s favorite economists 109S
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Leland’s favorite economists 111A
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Leland’s favorite economists 113v
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Leland’s favorite economists 115w
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Leland’s favorite economists 117n
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circumstances and even acts of will
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Leland’s favorite economists 121c
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Leland’s favorite economists 123D
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Leland’s favorite economists 125G
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The genesis of an idea 127Stuart Mi
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The genesis of an idea 129suggest t
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The genesis of an idea 131macroecon
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The genesis of an idea 133value. Hi
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The genesis of an idea 135half of m
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The genesis of an idea 137Unsettled
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The genesis of an idea 1398 “M. S
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ReferencesThe genesis of an idea 14
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10 The macroeconomics of money,savi
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The macroeconomics of money, saving
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The macroeconomics of money, saving
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Mr. YeagerThe macroeconomics of mon
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11 No-name moneyMaria Minniti and L
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No-name money 153many political lea
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No-name money 155consultants, who f
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No-name money 157bank chose the one
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No-name money 159While inflation in
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No-name money 161was reinforced by
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No-name money 163private ownership,
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No-name money 165Mencinger, Joze (1
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Monetary disequilibrium theory and
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Reflections on reswitching and roun
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Page 214 and 215: Reflections on reswitching and roun
Page 222 and 223: 14 Leland Yeager’s utilitarianism
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Page 236 and 237: 15 Ethnic conflict and theeconomics
Page 238 and 239: Ethnic conflict and the economics o
Page 252 and 253: NotesEthnic conflict and the econom
Page 258 and 259: The legacy of Bismarck 243War, the
Page 260 and 261: The legacy of Bismarck 245people wo
Page 262 and 263: The legacy of Bismarck 247system, b
Page 266 and 267: IndexAckley, G., Macroeconomic Theo
Page 268 and 269: Marshall, A.: approach to economics
Page 270: concerns 10-11, 150; monetarydisequ
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